Bank Charges HSN Code: Understanding HSN Classifications for Bank Charges
Banks charge many types of fees such as account maintenance charges, cheque book charges, ATM charges and loan processing fees. For correct GST treatment, these bank charges must be mapped to the right HSN or SAC code in every invoice and ledger.
In this guide you will learn the main bank charges HSN code, how different banking services are grouped under this code, what GST rates usually apply and how banks and businesses use these codes in GST billing and return filing.
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What Is the Bank Charges HSN Code?
Under GST, services use a service accounting code that works like HSN for goods. Financial and banking services are grouped in chapter ninety nine under the service code 9971. This code is commonly treated as the bank charges HSN code for most taxable banking services.
Within the family of 9971 codes, different detailed numbers cover deposit services, credit granting services, card related services and many other financial activities. For day to day GST work, banks and many businesses that record bank charges simply tag them under 9971 when they are taxable services.
Using 9971 as the base bank charges HSN code ensures that financial services are clearly separated from trading of goods in GST records. It also helps the tax department apply the correct rules for exemptions and rate changes that are specific to financial services.
Bank Charges - SAC Code Classification and GST Rates
Here are some commonly used HSN codes and GST rates for this category
4 Digit SAC Code Classification
| HSN/SAC Code | HSN/SAC Code Title | GST Rate |
|---|---|---|
| 9971 | Other Financial and related services | 18% |
| 9972 | Upfront amount payable for long term lease (30+ years) of industrial/infrastructure plots by specified Government entities. | 0% |
| 9973 | Other Leasing or rental services, with or without operator | Same rate as applicable on supply of like goods |
| 9981 | Services by an incubatee (up to Rs. 50 lakh turnover, subject to conditions) | 0% |
| 9982 | Legal services by advocates/firms to Government/Governmental Authority/Entity. | 0% |
| 9983 | Skill development services by NSDC, SSCs, approved agencies & partners. | 0% |
| 9986 | Support services to mining, electricity, gas and water distribution | 18% |
| 9988 | Other Manufacturing services on physical inputs (goods) owned by others | 18% |
| 9989 | Other manufacturing services; publishing, printing and reproduction services; materials recovery services. | 18% |
| 9991 | Legal services by advocates/firms to Government/Governmental Authority/Entity. | 0% |
| 9992 | Skill development services by NSDC, SSCs, approved agencies & partners. | 0% |
| 9993 | Services by cord blood banks for preservation of stem cells. | 0% |
| 9995 | Services by unincorporated/non-profit bodies to members for reimbursement/contribution (subject to conditions). | 0% |
| 9954 | Other construction services | 18% |
| 9961 | Services in wholesale trade (commission agents, brokers, auctioneers, etc.) | 18% |
| 9962 | Services in retail trade | 18% |
| 9963 | Other Accommodation, food and beverage services | 18% |
| 9967 | Other Supporting services in transport | 18% |
6 Digit SAC Code Classification
| HSN/SAC Code | HSN/SAC Code | GST Rate |
|---|---|---|
| 996111 | Services provided for a fee/commission or contract basis on wholesale trade | 18% |
| 996211 | Services provided for a fee/commission or contract basis on retail trade | 18% |
| 997111 | Central banking services | 18% |
| 997114 | Financial leasing services | 18% |
| 997119 | Other financial services (except investment banking, insurance services and pension services) | 18% |
| 997120 | Investment banking services | 18% |
| 997151 | Services related to investment banking (M&A, corporate finance, venture capital) | 18% |
| 997155 | Services related to the administration of financial markets | 18% |
| 997156 | Financial consultancy services | 18% |
| 997158 | Financial transactions processing and clearing house services | 18% |
| 997159 | Other services auxiliary to financial services | 18% |
| 997172 | Services of holding securities and other assets of trusts and funds and similar financial entities | 18% |
| 997221 | Property management services on a fee/commission basis or contract basis | 18% |
| 997222 | Building sales on a fee/commission basis or contract basis | 18% |
| 997223 | Land sales on a fee/commission basis or contract basis | 18% |
| 997224 | Real estate appraisal services on a fee/commission basis or contract basis | 18% |
| 998221 | Financial auditing services | 18% |
| 998311 | Management consulting and management services | 18% |
| 998362 | Purchase or sale of advertising space or time, on commission | 18% |
| 998363 | Sale of advertising space in print media (except on commission) | 5% |
| 998366 | Sale of other advertising space or time (except on commission) | 18% |
| 998817 | Prepared animal feeds manufacturing services | 18% |
| 998911 | Publishing, on a fee or contract basis | 18% |
| 998912 | Printing and reproduction services of recorded media, on a fee or contract basis | 18% |
| 998941 | Metal waste and scrap recovery (recycling) services, on a fee or contract basis | 18% |
| 998942 | Non-metal waste and scrap recovery (recycling) services, on a fee or contract basis | 18% |
| 999317 | Blood, sperm and organ bank services | 0% |
* GST rates may vary based on the latest GST notifications and amendments
HSN Code for Bank Charges and GST Rate
Most routine bank charges like minimum balance charges, cheque dishonour fees, demand draft fees, locker rent charges and loan processing charges are covered under the broad heading 9971 for financial and banking services.
Inside this group, codes such as 997111, 997112, 997113 and 997119 are often used for central banking services, deposit services, credit granting services and other financial services. Many commercial banks map their detailed charge codes to one of these service codes in their internal systems.
For a normal business that is only accounting for bank charges shown on its bank statement, it is usually enough to treat taxable bank fees as services under 9971 in the purchase ledger. The detailed split between specific sub codes is handled at the bank end for their own output service invoices.
Some special banking services can enjoy a concessional rate or complete exemption, for example certain card settlement services for small ticket transactions or services directly provided by the central bank. These special cases still sit inside the 9971 family but follow separate notification entries in the GST rate schedule.
GST on Bank Charges and HSN Code Classification
The standard GST rate for most taxable bank charges under heading 9971 is 18% on the value of the service. This rate commonly applies to fees such as processing charges, account service charges, cheque bounce charges, card annual fees and other similar banking services.
Some items shown in bank statements do not attract GST. Interest income on loans, advances and deposits is generally exempt, so interest debits and interest credits are usually outside the scope of GST. Only the service fee portion, such as a separate processing charge, is normally taxable at 18%.
Services by the Reserve Bank of India are fully exempt from GST. In addition, certain acquiring bank services for settlement of small value card transactions up to a notified limit may carry a GST rate of zero for the acquiring bank, subject to the conditions given in the notification.
Because of these mixed rules, the same bank statement can show both taxable and exempt lines. The HSN or SAC code 9971 is used only for the taxable banking services that fall under financial and related services . Exempt lines like interest are reported under the exemption provisions rather than under 9971 in GST returns.
For GST filing , banks issue tax invoices or statements that show the value of taxable services, the applied GST rate and the service code 9971 or a more detailed sub code. Businesses that pay these charges then claim input tax credit on the GST part, subject to normal conditions, by booking the bank charge with the correct HSN or SAC reference in their purchase records.
Correct use of 9971 for bank charges also helps during audits, because tax officers can quickly see how much of the bank related expenditure was taxable, how much GST credit was claimed and whether any exempt services were wrongly treated as taxable or the other way round.
Conclusion
The bank charges HSN code is an important part of GST compliance for both banks and their customers. Financial and banking services are grouped under the service code 9971, with detailed sub codes for different types of services.
When taxable bank charges such as service fees, processing charges and card fees are mapped to 9971 and the standard GST rate of 18% is applied, invoices remain accurate and input tax credit can be claimed smoothly where allowed. At the same time, exempt items like interest and notified zero rated services are kept out of this code, which reduces the risk of GST disputes and penalties on bank charges.
